Hot money’ surges to record $4.6 B in 2010

MANILA, Philippines –  Foreign portfolio investments in local stocks and securities, also called “hot money” hit a new record level of $4.61 billion in 2010, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando M.Tetangco Jr. said the 2010 figure was nearly 12 times higher than the $388.02 million recorded in 2009.

“The bullish stock market performance in 2010 resulted from positive investor sentiment with the assumption of a new administration and strong macroeconomic fundamentals on the domestic front, inspiring greater confidence in the country,” Tetangco said.

The strong investor confidence, he explained, helped ease concerns about the sovereign debt crisis in Europe, the benign economic outlook in the US and China as well as the effects of the geopolitical risks within the Korean peninsula.

Statistics showed that gross foreign portfolio investment inflows more than doubled to $12.997 billion in 2010 from $6.335 billion in 2009 as investments in shares in the Philippine Stock Exchange (PSE) surged by 75 percent to $8.5 billion from $4.8 billion. The stock market cornered 65.2 percent of the total net inflows of foreign portfolio investments.

Tetangco said major beneficiaries of hot money include banks with $1.7 billion followed by property companies with $1.6 billion, holding firms with $1.5 billion, telecommunication companies with $1.3 billion, and utility firms with $930 million.

He added that major sources of foreign portfolio investments last year included the US, Singapore, United Kingdom, Luxembourg, and Hong Kong.

The BSP pointed out that the initial public offerings (IPO) of Cebu Air Inc. of taipan John Gokongwei and Nickel Asia Corp. contributed to the strong inflows last year.

Furthermore, he added that the strong interest in government securities brought in about $4 billion while placements in peso time deposits grew four-fold last year.

On the other hand, outflows jumped 41 percent to $8.386 billion last year from a year-ago level of $5.947 billion. Outflows comprised mainly of withdrawals from interim peso deposits where funds are parked pending repatriation or reinvestment.

For the month of December alone, net inflow of hot money reached $428.4 million a complete reversal of the $43.4 million outflow booked in the same month in 2009. Inflows surged 203 percent to $1.4 billion from $462.3 million while outflows grew by 92.4 percent to $973.2 million from $505.7 million.

Tetangco earlier stressed the need for the government to transform the “hot money” or speculative investments into long-term investments.

Authorities said there is a need for long-term investments such as major infrastructure projects under the public private partnership (PPP) scheme so the ample liquidity in the financial system could be deployed into productive uses.

“For us to transform this liquidity into productive uses, there has got to be users or investors that will utilize or take advantge of the ample liquidity to finance their development projects,” the BSP chief added. –Lawrence Agcaoili (The Philippine Star)